Imaginative minds have sometimes pegged the Internet as the new Wild West, a vast land of opportunity fraught with peril. That’s a bit of a stretch, but if there’s one ideal that should hold as true in this new frontier as it did in the old, it’s Roy Rogers’ plea to never fence him in.
Caps placed on data usage threaten to do just that, according to a new study released by the Open Technology Institute (OTI). The report celebrates advances in Internet-based technology, like cloud computing and VoIP, and touts the educational benefits of high-quality video streams and video conferencing, all made possible by an open Internet. These kinds of innovations and more, OTI suggests, will cease to be adopted if carriers, both wireline and wireless, continue to place restraints on data usage under the guise of unclogging the pipes.
“Network congestion tends to be limited to specific times and locations,” wrote OTI policy director Benjamin Lennett. “Therefore capping usage across the board is a fairly crude way to handle network congestion.”
Flawed as it is in addressing network congestion, according to OTI, capping data continues partly so the U.S. market’s largest mobile providers can further monetize data usage, particularly via overage charges.
“If you’re AT&T and Verizon and you now have tiered pricing with hefty overage fees, you've got little incentive to encourage subscribers to offload data traffic to home or office Wi-Fi,” wrote Lennett.
The report calls for “policymakers to implement reforms to promote competition in the broadband marketplace.”
But while the wheels of democracy grind and lurch into action on this practice, perhaps one of the many new MVNOs in the market has the power to disrupt? A lot is made of how many of the first wave of predominantly voice and messaging MVNOs spectacularly flamed out in the mid-2000s. Yet for as mesmerizing as it may have been to watch the likes of Mobile ESPN explode like the Death Star just months after launch, it’s been more rewarding to watch Boost, Virgin Mobile and Tracfone evolve.
But since the major carriers now see voice and messaging service as hugely secondary to data – which is understandable, given the profit differentials – it’ll take a different kind of MVNO to shake things up and possibly peel the cap off big data.
Taking a byte
In order for a small MVNO to offer unlimited data, a large amount of creativity is needed. Sometimes, it even means technically omitting the term “unlimited data.”
In the case of new data-based MVNO FreedomPop, it means the data well runs as deep as the user is willing to swim. Operating on a freemium model – although it does make paid plans available – FreedomPop starts users out with a free 500 MB per month and then encourages users to share via social networking in order to earn more. But the real pay dirt comes from the company’s platform for gaming and promotions, where users can rack up the gigs. FreedomPop COO Steven Sesar said customers can score a cool 2 GB by signing up for Netflix.
“It’s totally unlimited,” said Sesar in reference to the amount of data users can accumulate from these activities. It all depends on how much time users feel like dedicating to earning megabytes and how willing they are to put their personal information out there.
Other fairly new entrants to the data MVNO arena, like Republic Wireless, rely heavily on Wi-Fi offloading, going so far as to offer phones that “automatically roam onto free or subscriber-owned Wi-Fi connectivity,” according to Lennett.
But perhaps the most intriguing MVNO data option is Ting’s metered plan, which charges customers for the data they use and refunds them for the data they don’t use. It’s a model that calls to mind how companies charge for the utilities pumped into your home each month, the often taken-for-granted luxuries like water, heat and electricity. But once the end of the month surprises no longer loom over mobile data use, like Ting proposes to do, wireless data could join the ranks of comforts we can safely rely on every day.
Of all the cost-saving techniques MVNOs employ in the quest for unlimited data, Roger Entner, founder of Recon Analytics, thinks SIM-only may be the best option, relying on customers to bring their own devices and avoid the subsidy model all together.
“Here, the interesting twist is that instead of spending money on marketing, they’re giving their members a nice amount of money every month,” said Entner.
Of course, customers have to be savvy and understand that an MVNO’s offer of unlimited data is often in name only and carries a lot of stipulations.
“Unlimited data works only in two scenarios. One is that nobody’s using enough so that it matters,” Entner said, “or you know how much people are using and can predict it accurately in the future. And we can’t do that.”
Without being able to safely operate under either of these scenarios, Entner is skeptical about MVNOs really being able to break open the boundaries set on data usage by large carriers, especially when all providers, virtual or not, operate within the same parameters.
“When you look at it, it looks like [MVNOs] can walk on water, or they can repeal gravity. But they all live in the same world,” Entner said.
The wholesale model
So without the size to take on the big guys customer for customer, can an MVNO instead rely on the strength of its idea – an alternative business model that can create enough of a following to get the major carriers to rethink their tiered plans? Entner warns that the costs involved with becoming too successful will ultimately end unlimited pricing structures. But an MVNO needs an established network’s coattails to ride on the way to getting big enough for that to happen.
For companies selling data to niche markets, wholesalers didn’t come much more tailor-fit than Clearwire and its WiMAX network, hovering over the major markets in the U.S.
“Clearwire is kind of a strange company,” said industry analyst Jeff Kagan. “It’s different than any other wireless carrier in the United States. It’s like somebody from the ’60s now living today,” he said in reference to Clearwire’s wholesale data warehouse model, unburdened by the high overheads connected with the larger carriers.
MVNOs like Karma, FreedomPop and kid-centric Kajeet that jump onto Clearwire’s network often repurpose the hardware already offered by the company and sell away.
But with Clearwire’s imminent acquisition at the hands of Sprint, the already struggling company’s future is even more up in the air now.
As unique an MVNO partner as Clearwire makes, Sprint isn’t so bad itself. The open arms of the nation’s third-largest carrier have provided a nurturing environment for many MVNOs with new ideas and dreams of how data could and should be sold. And with Clearwire’s large swaths of spectrum most likely coming under the control of Sprint soon, it could mean a big boost in competiveness for the company, as well MVNOs operating on its LTE network.
“Sprint can be quite disruptive to every carrier,” said Entner.
Whether this means that the MVNOs that Sprint brings along for the ride have a shot at causing a disruption, particularly loosening the cap on data usage, remains to be seen. The current crop of MVNOs selling mobile data may end up serving as more of a marketplace of ideas, with plans like Ting’s metered pricing and Republic’s automatic Wi-Fi offloading perhaps leading toward a future where mobile data users can just put the pedal to the metal and not worry about how many megabytes are left in the tank.